Having seen the title of this article, you may well be perplexed by the complex phrase “futures on S&P 500 index”. But try not to make a quick judgment. Although it might startle you in the beginning, this is quite a familiar term for stock market professionals. If you do not belong to their group, please turn your attention to the screen. In this article, we will analyze the concept of S&P 500 futures in depth, so that any newcomer to the market can understand it fully. So, let us get started.

S&P 500 Index

As a rule, when analyzing the news about the equity market, traders primarily pay attention to the US stock market. Stock indices are its main indicators. The S&P 500 index is traditionally seen as the most popular of them all. So, we are going to take a closer look at it.

The S&P 500 index was introduced in 1957. Initially, it contained only stocks of industrial, railway, and energy companies. Financial stocks were included in the index only 2 years later.

As the name suggests, the S&P 500 is composed of America’s 500 largest publicly traded companies that account for over 80% of the total capitalization of the US stock exchange.

The majority of companies in the S&P 500 index are focused on foreign markets. Some 30% of revenue from the index comes from overseas markets. Firms from the IT sector and industries related to the production of raw materials are the most oriented towards foreign markets of them all.

Monitor S&P 500 charts online in a special section on the InstaForex website.

History of S&P500 futures

Nowadays, the most common way to trade the leading US index is to play S&P 500 index futures*.

S&P 500 futures are a type of derivative contract that provides a buyer with an investment price by the settlement date. Such contracts are called derivative because when a trade is conducted, the transfer of ownership is not carried out.

S&P 500 futures were listed on the Chicago Mercantile Exchange in 1982 under the ticker symbol* SP. At the same time, E-Mini S&P 500 features are its most common derivative instrument accessible to traders. Its value is one-fifth that of the full-sized contract. E-Mini S&P 500 features are designated by the ticker symbol ES. The core difference between ES and SP is that the former one is an electronically-traded futures contract. So far, E-Mini S&P 500 features are one of the most liquid instruments on the derivatives market. Likewise, trading volumes in E-Mini S&P 500 features are higher than in the main S&P 500 futures.

However, amid the constantly increasing capitalization of the US stock market, E-Mini S&P 500 features contracts turned into an immensely expensive instrument for many private investors. For that reason, an additional Micro E-mini S&P 500 futures contract was introduced. Its value is one-tenth that of the E-Mini contract. Micro E-mini S&P 500 futures are traded under the ticker symbol SPX on the exchange.

*Futures are a contract to buy/sell a particular instrument (stocks, currencies, commodities) at a specific price at a future date.

*Ticker is an abbreviation of an instrument quoted on the exchange.

Despite their differences, all three contracts were created for the same purpose. They only differ in the size of funds required to start trading.

How to trade S&P500 futures

Beginner traders, willing to play the S&P 500 index futures or its derivatives in the highly liquid global markets, should find a trustworthy broker and open an account. Registration of a trading account with an intermediary company is intuitive and usually takes a few minutes. For instance, it will take only 3 minutes of your time to open an account with InstaForex.

Regardless of whether you are a professional or a newcomer, you have an opportunity to master the art of online trading using MetaTrader 4 from InstaForex, one of the most popular trading platforms among all traders.

The Forex calculator from InstaForex will help you calculate the value of a contract as well as many other parameters required for trading.

E-mini S&P 500 futures are traded on the Chicago Mercantile Exchange almost 24 hours a day. All futures on the S&P 500 index are quarterly.

This trading instrument receives a great deal of attention from investors and market experts.

The Analysis section of the InstaForex website features all the up-to-date information on the S&P 500 index and its futures.

Conclusion


Nowadays, forecasts about the future state of the stock market are mixed. At the same time, the S&P500 index is expected to show a steady rise, according to many market experts. Nevertheless, traders should be extra cautious when trading futures, even on an index as stable as the S&P500. This is not a hedging instrument at a time when the market is moving against you. Moreover, leverage is also used when trading this instrument. So, the chances (odds) of making a higher profit as well as incurring hefty losses are equally high.